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Sale of Abbey Life Assurance hit by regulator investigation

The plans for Deutsche Bank to sell British insurer Abbey Life Assurance has hit a roadblock amid an investigation from the Financial Conduct Authority (FCA).

According to a Reuters report, bidders are struggling to settle on a valuation of the firm despite three finalists having already been established in the auction process – namely Admin Re, which is a unit of Swiss Re; Legal & General; and Phoenix.

The German lender has been considering selling the British insurance unit since October last year. However, in March, the FCA started an investigation into Abbey Life’s long-time life insurance customers. Depending on the results of the investigation, this could potentially lead to compensation payments for some policyholders and possibly even fines for the insurer.

Abbey Life is not the only insurer under investigation, however – a further five have been targeted as the regulator looks at whether insurers have treated customers locked into pension and saving plans fairly. However, Abbey Life, along with Old Mutual, is also being examined about whether it has contravened additional regulatory requirements linked to the treatment of long-standing customers.

According to the Reuters report, there is a large risk for potential bidders – and it is “too big to solve just by offering a discount.”

The value of Abbey Life is thought to have been placed at around £1 billion. Deutsche Bank bought Abbey Life for around £977 million back in 2007 but is now looking to restructure its business.